International Business Machines Corp. (NYSE: IBM) sells its products and services primarily to large companies, enterprises and governments. Google Inc.’s (NASDAQ: GOOG) ad sales often draw on smaller firms. And its traffic success points to the strength of consumer use of the Web, both on personal computers and mobile devices. Together, their fourth-quarter earnings and 2013 forecasts indicate that the broad economy has begun to go beyond the early stages of healing and into a period of sustained growth.
The combined sales of the two tech firms added up to just above $150 billion, so the case that the revenue is an indication of the economy has a whole may seem naive. A more detailed look at their results tells otherwise.
Most of the focus on IBM’s financial release centered on the 6% rise of its fourth-quarter net income to $5.8 billion, but the analysis of its revenue statements tells more about its progress. Sales of IBM software, which include a wide array of products — among them WebSphere, Information Management, Tivoli, Lotus and Rational — demonstrates strength across nearly every large industry. Revenue from its System z mainframe, an extremely high-end product, rose 6%. Revenue from all products sold within BRIC nations rose 7%. No single large division showed a sales fall off of more than 3.2% in the fourth quarter, and most were much better. Perhaps the most remarkable number from the financial release was that Europe/Middle East/Africa dropped only 5% to $9.1 billion. The European Union economic fiasco did not cripple sales.
Google’s 2012 revenue reached $50 billion. Its fourth-quarter revenue moved higher by 36% to $14.42 billion. International revenue reached 54% of the total. Most telling as a sign of the overall economy, Google’s Network sales, which come from millions of sites, reached 27% of total revenue. These sales represent a litmus test for scores of industries and tens of thousand of diverse Web properties, many of them small.
Most big corporation earnings, whether they are from giants like Exxon Mobil Corp. (NYSE: XOM) or Apple Inc. (NASDAQ: AAPL), may come from customers across the world, but few have results that spread much beyond large niches. On the other hand, the power of the world’s largest search engine and world premier tech company, broad in sales and customers, capture the global recovery well.